I recently met with the VP of a large foundation, who shared that they were struggling to define their “impact.” I applaud them for having the conversation, which can be a challenging one. Nowadays, everyone wants to talk about outcomes and impact. Foundations are the first ones to ask nonprofits about their anticipated long-term outcomes, and I think it speaks well of foundations that are trying to follow suit in doing what they ask others to do.
Except – foundations have a different model. They are different from nonprofit organizations in that they are at least one step removed from providing the direct service. Foundations are not businesses that are trying to generate revenue by selling services or products. And foundations are not venture capitalists – although there is a lot of recent chatter about how foundations should operate more like VCs. This doesn’t seem like a good idea to me – again, because it is a different model. Foundations don’t invest in organizations that are seeking to generate revenue. They are investing in organizations solving social problems.
Brian Trelstad, Acumen’s former CEO, was blunt about the challenges of measuring investments: “It’s complicated, expensive, and often impractical.…” This article goes on to share that Robin Hood is a grant-making foundation created by hedge fund managers with a penchant for hard numbers. They look at results and studies that link those measures to a longer-term outcome. But Robin Hood uses these figures with caution, employing them as placeholders for estimating benefits until better research comes along.
The article best summarizes the idea that “measuring impact matters, but we need to be realistic about the constraints. It requires a level of research expertise, commitment to longitudinal study, and allocation of resources that are typically beyond the capabilities of implementing organizations. It is crucial to identify when it makes sense to measure impacts and when it might be best to stick with outputs — especially when an organization’s control over results is limited, and causality remains poorly understood.”
What we’re talking about is a long-term commitment – which isn’t always satisfactory. Boards of Directors often want to see the impact of their investments within a few years – not ten or twenty years down the road. And it’s not unusual during that time for foundations to change their funding strategy, which means that they are starting from scratch in terms of defining their impact. There is not a “one-size fits all” solution to measure impact. But one step in the right direction is to set some early and relatively easy milestones so that there is an opportunity to celebrate some small wins. That will help to keep the enthusiasm going over the long-term.